Developments in the Red Sea
Dec. 15, 2023
Shipping and logistics majors A.P. Moller-Maersk and Hapag-Lloyd have ordered their ships to bypass the Bab el-Mandeb Strait on Friday after attacks on their vessels. Maersk said its decision comes after a near-miss incident involving the Maersk Gibraltar on Thursday and another attack on a container vessel on Friday. An estimated 17,000 merchant ships cross through the Bab el-Mandeb Strait each year (equating to hundreds of vessels per day).
In evaluating the impact on tanker markets, we draw a parallel to our previous analysis highlighting a Suez Canal closure given that most vessels transiting the Suez also pass through the Red Sea. The current Red Sea developments may have a similar impact as the Suez closure with one exception being the availability of Saudi crude that can bypass the Bab el-Mandeb Strait by utilizing the available capacity in the East-West pipeline.
Notwithstanding, major crude and tanker routes would be disrupted by the closure of the Suez Canal including Middle East>Westbound and Europe>Eastbound trades (Russian barrels to Asian destinations since 2022). In this scenario, we assume oil flows remain at current levels while sailing distances notably increase through the Cape of Good Hope. In order to measure the impact from a longer sailing distance, we converted tanker demand into vessel equivalent for each DPP segment. The mid-sized tankers, Suezmax and Aframax, will find support from an additional 72 and 66 demand equivalent, respectively, compared to only 4 additional VLCCs worth of demand. We also highlight the large impact for the CPP segments, as we calculated a Suez Canal closure would result in net vessel demand equivalent additions of +45 LR2s, +17 LR1s, and +30 MR2s.
Figure 1: Crude Directional Flows Figure 2: Vessel Equivalent Demand
Source: McQuilling Services
Share
Comments
You need to login to comment.
